Series 6 Simulation Exam

Under SIMPLE plans, employers must make a matching contribution of up to what percentage of the employee's annual wages? (A) 3% (B) 5% (C) 7% (D) 10%,

(A) 3%

Of the funds listed below, which would most likely have the highest portfolio turnover ratio? (A) Aggressive growth fund (B) Government bond fund (C) Corporate bond fund (D) Strategic income fund,

(A) Aggressive growth fund

Through whom may an investor redeem mutual fund shares? I. The dealer that sold the funds; II. The transfer agent; III. The SEC; IV. The custodian? (A) I and II (B) I and III (C) II and III (D) III and IV,

(A) I and II

The shareholders of a mutual fund have certain rights associated with the ownership interests they hold in the company. These rights include I. Approval of investment advisory agreement. II. Voting rights/proxy rights regarding company issues. III. Election of board. IV. Approval authority for the company's annual report. (A) I, II and III only (B) I and IV only (C) II, III and IV only (D) I, II, III and IV,

(A) I, II and III only

Which of the following statements is/are correct concerning the basis of a mutual fund's redemption price? I. The price is based on the next calculated POP. II. The redemption price is the next computed NAV. III. If the fund charges a redemption fee, the fee will be based on a percentage of the NAV. IV. A shares are assessed a load upon redemption. (A) II and III (B) II and IV (C) I and II (D) I and IV,

(A) II and III

Which of the following is NOT true regarding a nonqualified retirement plan? (A) It needs IRS approval. (B) Excess over cost base is taxed. (C) It can discriminate in offering its benefits and selecting participants. (D) Tax on accumulation is deferred.,

(A) It needs IRS approval.

To determine a corporation's profitability year-over-year, which of the following is most suitable? (A) Profit ratio (B) Earnings per share (C) Fully diluted earnings per share (D) Price/earnings ratio,

(A) Profit ratio

If an insured commits suicide within the first 2 years of a variable life policy issue, the insurance company? (A) Returns the premiums paid into the policy. (B) Returns the sales charge plus the value of the separate account. (C) Must pay the death benefit. (D) Pays nothing.,

(A) Returns the premiums paid into the policy.

A registered representative discusses reduced sales charges with a customer during the application process. The rep may discuss all of the following topics EXCEPT? (A) That borrowing enough money to purchase shares above a breakpoint would save the customer money. (B) How the customer can take advantage of sales breakpoints. (C) The reduced sales charges available through a letter of intent. (D) How rights of accumulation can help the customer save money.,

(A) That borrowing enough money to purchase shares above a breakpoint would save the customer money.

J is a registered representative who has just sold an Index Annuity with a 15-year surrender charge to T, a retiree turning 79 years old next week. Which of the following statements is true concerning this situation? (A) This strategy would be considered inappropriate because the surrender charge of 15 years would not be appropriate for an older investor. (B) This strategy is considered inappropriate because J should encourage T to invest in a hedge fund to protect his investment (C) This would be considered an appropriate investment for T because an Index Annuity will generally keep up with inflation. (D) This strategy would be appropriate because annuities are tax-deferred and T would be required to pay taxes only on the money he withdraws from the annuity, which is good for someone on a limited income.,

(A) This strategy would be considered inappropriate because the surrender charge of 15 years would not be appropriate for an older investor.

A registered representative sold a variable contract and received the completed application and initial payment from the customer. Generally speaking, payments are considered received? (A) When the contract application is accepted by the issuer. (B) When the contract application is accepted by the broker/dealer. (C) When the registered representative who sold the annuity receives a payment from the customer. (D) When the customer's payment is received by a member firm.,

(A) When the contract application is accepted by the issuer.

When Bob Turner died, he was the owner of a variable life insurance policy that had a $110,000 cash value and a $250,000 death benefit. Three years earlier, he had taken out a loan on the policy for $30,000. How much in death benefit proceeds will his beneficiary receive? (A) $110,000 (B) $220,000 (C) $250,000 (D) $330,000,

(B) $220,000

An investor's mutual fund account is currently worth $48,000. The sales charge was 8½%. If she withdraws 6% per year, her monthly payments will be? (A) $219.60. (B) $240. (C) Indeterminate; payment will fluctuate with market (D) None of the above; withdrawal penalties may apply,

(B) $240.

A teacher has made contributions to a tax-qualified variable annuity in the amount of $80,000. The account value has appreciated to $150,000. If the teacher is in the 15% tax bracket and withdraws $20,000, how much will be due in taxes? (A) $0 (B) $3,000 (C) $12,000 (D) $22,500,

(B) $3,000

All of the following apply to preferred stock EXCEPT? (A) Preferred stock is often convertible to common shares. (B) All preferred stock is cumulative for past dividends and allows for a dividend catch up at some point in the future. (C) Preferred shares are senior to common shares. (D) Preferred shares receive dividends prior to common stock when dividends are declared.,

(B) All preferred stock is cumulative for past dividends and allows for a dividend catch up at some point in the future.

The term "mutual fund retail communication" includes all of the following EXCEPT? (A) An email sent to 30 individuals over a 25-day period encouraging them to invest in a particular growth fund. (B) Mutual fund trade confirmations. (C) Any communication used by any person to offer to sell. (D) Any communication used to induce the sale of securities of any investment company.,

(B) Mutual fund trade confirmations.

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences? (A) Section 457 Deferred Compensation Plan (B) Section 1035 Policy Exchange (C) Modified Endowment Exchange (D) 401(k) Plan,

(B) Section 1035 Policy Exchange

Which of the following is NOT true concerning physical safety of mutual fund holdings? (A) The shareholder needs to maintain share certificates since funds use "book entry" accounting. (B) Securities cannot exist as electronic records in computers. (C) If certificates are held, they must be surrendered in good order before shares can be redeemed. (D) Physical safety of fund's assets is the responsibility of the custodian.,

(B) Securities cannot exist as electronic records in computers.

An investor wants to set up a fixed withdrawal plan for her mutual fund account. What is the most important consideration? (A) The fund offers the exchange privilege. (B) The fund offers rights of accumulation. (C) All withdrawal plans involve uncertainty. (D) The fund family offers many investment choices.,

(B) The fund offers rights of accumulation.

An investor owns shares of a mutual fund that regularly distributes dividends. He has decided to reinvest those dividends back into the mutual fund. Which of the following statements would be true about his dividend distribution reinvestment? (A) The investor would be allowed to reinvest dividend at whatever the next computed price was based on forward pricing., (B) The investor would be required to pay taxes on the dividend whether he received them in cash or reinvested them back into the fund. (C) The investor can reinvest his dividends without paying any taxes because he never actually received the money from the dividend. (D) The investor would have a reduced tax liability on the dividends he reinvested.,

(B) The investor would be required to pay taxes on the dividend whether he received them in cash or reinvested them back into the fund.

A U.S. government bond quoted at 108.06 - 109.09 has an asking price of? (A) $108.60. (B) $1,081.88. (C) $1,092.81. (D) $1,099.00.,

(C) $1,092.81.

A corporation has issued 10 million shares of common stock that are currently trading for $5 per share. There are 2 million shares of treasury stock. What is the total value of outstanding common stock shares? (A) $8 million (B) $10 million (C) $40 million (D) $60 million,

(C) $40 million

The best definition of an annuity unit is? (A) An assumption of a reasonable rate of return on the investments in the separate account. (B) A unit used to express the value of fixed annuities only. (C) An accounting measure that is created at the beginning of the annuity period and is used to determine the amount of future annuity payments. (D) A unit of ownership in the separate account that, when multiplied by the value of a unit, describes the account holders value during the accumulation phase.,

(C) An accounting measure that is created at the beginning of the annuity period and is used to determine the amount of future annuity payments.

Which of the following regulatory bodies has authority over variable life policies? (A) State insurance departments (B) FINRA (C) Both FINRA and state insurance departments (D) None of the above,

(C) Both FINRA and state insurance departments

The Investment Company Act of 1940 allows the 12b-1 fee to cover normal operating expenses of a mutual fund, which includes all of the following EXCEPT? (A) Fees for printing prospectuses. (B) Sales material. (C) Management fees. (D) Sales commissions.,

(C) Management fees.

All of the following apply to preferred stock EXCEPT? (A) Preferred shares receive dividends prior to common stock when dividends are declared. (B) Preferred stock is often convertible to common shares. (C) Preferred stock is cumulative for past dividends and allows for a dividend catch up at some point in the future. (D) Preferred shares are senior to common shares.,

(C) Preferred stock is cumulative for past dividends and allows for a dividend catch up at some point in the future.

Which of the following may establish a SEP?,

(C) Self-employed individuals

Which of the following is the quick ratio? (A) EPS vs. P/E ratio (B) P/E ratio (C) The acid test (D) EPS,

(C) The acid test

Which of the following is a risk associated with a mutual fund withdrawal plan? (A) There are no dividends or capital gains. (B) Investors have no control over the liquidation process. (C) The investor may outlive his or her income. (D) The sales charge for the service is high.,

(C) The investor may outlive his or her income.

Which of the following describes the practice of front-running? (A) Purchasing securities after receiving nonpublic material information (B) Borrowing securities from clients (C) Copying the trades of clients in a personal account (D) A securities professional executing a trade in his own account prior to the client's to achieve a more profitable trade,

(D) A securities professional executing a trade in his own account prior to the client's to achieve a more profitable trade

A broker/dealer with a numbered account name on its books is required to keep which of the following on file? (A) A statement from a registered principal attesting to the account owner's name (B) A signed statement from the registered representative listed on the account attesting to the identity of the account owner (C) A certified copy of the account owner's current state-issued ID card (D) A signed statement from the customer attesting to his or her ownership of the account,

(D) A signed statement from the customer attesting to his or her ownership of the account

Per the customer's request, the name of his account was changed from "John Smith" to "John Smith Revocable Trust." The customer can enter a trade order? (A) The next day. (B) As soon as his registered representative receives a copy of the trust document. (C) Immediately. (D) After the account name change is approved by a qualified registered principal who is aware of the circumstances that led to the change.,

(D) After the account name change is approved by a qualified registered principal who is aware of the circumstances that led to the change.

Which of the following is true regarding the review and approval of correspondence? (A) Correspondence must be approved by FINRA prior to use. (B) Correspondence must be approved by the financial regulatory branch of each state government prior to use. (C) Correspondence does not need to be approved. (D) Correspondence must be approved by a registered principal before or after use.,

(D) Correspondence must be approved by a registered principal before or after use.

With a systematic withdrawal plan, from what source are the first payments made? (A) Original capital (B) Net invested capital (C) Capital gains (D) Dividends,

(D) Dividends

The cash value of a variable life policy I. Is not guaranteed. II. Increases as premiums are paid. III. Fluctuates based on the performance of the securities in the separate account. (A) I and II only (B) I and III only (C) II and III only (D) I, II and III,

(D) I, II and III

Which of the following disclosures must appear on investment analysis tools, reports generated by investment analysis tools, and retail communication related to investment analysis tools? I. A description of the criteria and methodology including its limitations and underlying assumptions; II. A statement that results can vary with each use and over time; III. A statement that FINRA has approved the investment analysis tool; IV. A statement that projections are hypothetical and do not reflect actual investment results. A) III and IV (B) I, II, III, and IV (C) I and II (D) I, II and IV,

(D) I, II and IV

Jonathan Appleseed is a registered representative with a broker/dealer authorized to market variable contracts. Jonathan sold a variable annuity to a client, but the client decided that he no longer wanted the annuity. If the contract is tendered within 7 business days after the acceptance of the contract application, Jonathan will have to? (A) Submit an additional "suitability" form to FINRA consumer relations division for review. (B) Register a consumer complaint in the client's file for annual compliance review. (C) Return one half of the commissions to the insurer. (D) Return all commissions earned.,

(D) Return all commissions earned

The "liquidity" of an investment is best described as? (A) Whether the investment can be traded on an exchange (auction market) or must be negotiated over the counter. (B) Whether trading activity is heavy or light on a given trading day. (C) The extent to which the investment is composed of cash or cash equivalents. (D) Whether the investment can be sold as quickly and profitably as expected, should the investor wish to sell.,

(D) Whether the investment can be sold as quickly and profitably as expected, should the investor wish to sell.

All of the following investments may be suitable for a client in need of "current income" EXCEPT? (A) Government agency securities. (B) Utility stocks. (C) Preferred stocks. (D) Zero-coupon bonds.,

(D) Zero-coupon bonds.

Your client has not paid for a stock purchase in the allotted time period. According to Regulation T, this account will be frozen for? (A) A period of time necessary to receive payment for the transaction. (B) 7 days. (C) 30 days. (D) 90 days.,

90 days

A customer requests additional information about a trade confirmation recently received. The requested information must be furnished within? (A) 5 business days of the request. (B) 30 business days of the request. (C) 5 business days after the date of the transaction. (D) 15 business days after the date of the transaction.,

A) 5 business days of the request.

An employee quits her job where she has a balance of $10,000 in her employer-provided qualified plan. If she decides to move the balance to a traditional IRA through a direct transfer, how much will be transferred from one plan administrator to another, and what is the tax consequence? (A) $8,000, tax on growth only (B) $10,000, tax on growth only (C) $10,000, no tax consequence (D) $8,000, no tax consequence,

C) $10,000, no tax consequence

An investor is participating in a dollar cost averaging plan with her mutual fund. She is investing $1,000 per month and has been in the plan for 4 months. The monthly share prices have been $5, $4, $2, and $8. How many shares does she own after the 4-month period? (A) 500 (B) 875 (C) 995 (D) 1,075,

D) 1,075

The total expenses divided by the average net assets is the formula used in determining the mutual fund's? (A) Expense ratio. (B) Sales charges. (C) 12b-1 fees. (D) Management fees.,

(A) Expense ratio.

Actuarial science considers a person to be statistically dead at? (A) Age 76 for men and age 77 for women. (B) Age 100. (C) Age 76. (D) Age 77.,

(B) Age 100.

Which of the following annuity contracts provides special interest credits in the first year? (A) Variable Annuity (B) Index Annuity (C) Fixed Annuity (D) Bonus Annuity,

(D) Bonus Annuity

Tony has been investing on his own for the past 15 years, and over that time his results have been "below average" in comparison to the overall stock market. A friend recommended that Tony consider investing in mutual funds because the funds "may be able to save him a lot of time and money." What feature of mutual funds is best described by what Tony's friend stated? (A) The financial and economic research that the funds provide to their shareholders (B) The professional management of tax related issues by the fund (C) The stated investment objective of the mutual fund itself (D) The ability to set-up "qualified" accounts,

(A) The financial and economic research that the funds provide to their shareholders

With a systematic withdrawal plan, which type of plan is implemented when the investor wishes to receive the same amount of money with each payment? (A) Fixed shares periodic payments (B) Fixed asset periodic payments (C) Fixed dollar periodic payments (D) Fixed percentage periodic payments,

(C) Fixed dollar periodic payments

A fundamental analyst would use technical analysis in determining which of the following? (A) Earning trends (B) Capitalization (C) Liquidity (D) Timing,

(D) Timing

Audits of broker/dealers' Anti-Money Laundering Programs? (A) Must be conducted by an independent third party. (B) Must be conducted every 3 years by a CPA. (C) Must be conducted annually by Chief Compliance Officer. (D) Are conducted annually by FINRA.,

A) Must be conducted by an independent third party.